RACELAND, Ky. (WSAZ) – If you don't pay your federal income tax, your wages can be garnished and you could go to jail.

But if a city doesn't pay its taxes, many lives, services and citizens’ safety can be affected. Raceland is a town facing a federal income tax fiasco.

In an emergency session Wednesday night, Raceland Mayor Don McKee told a stunned city council that the Internal Revenue Service seized nearly $100,000 for non-payment of 2006-2007 federal taxes. That's nearly the Greenup County town's cash-on-hand budget.

Initially, the mayor said he'd limit fire and police protection, lay off city workers just to pay city bills before backtracking.

"The fire trucks will run," he said. "The police will answer calls."

Raceland City Council Member Dana Williamson said, "This will affect us, we have no tax base."

Many say the problems stems from miscommunication and carelessness -- that the tax payments were placed at the bottom of the pile and ignored.

City Clerk Ramona Barber said Raceland was short of funds at the end of the year to pay the income tax, and she warned the mayor and Police Chief Don Sammons but not council.
The mayor blames the IRS for not sending out proper payment notices

"They said they'd get back to us with a payment plan," he said.

But some angry council members say the funding fiasco stems from internal mismanagement and miscommunication.

"We never got a notice on taxes, ever," Williamson said.

Council finally voted to borrow up to $75,000 from a local bank to keep Raceland running. Barber assured the city attorney that this year's federal income taxes have all been paid on time, both weekly and quarterly.